Final Question Paper: Corporate Finance

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/MiddSuppose that in the coming year, you expect Exxon-Mobil stick to have a volatility of 42% and a beta of 0.9, and Merck 's stock to have a volatility of 24% and a beta of 1.1. The risk free interest rate is 4% and the markets expected return is 12%. The cost of capital for a project with the same beta as Merck 's stock is closest to: . | d. 12.8% | E[R] = Rf + Beta × Risk Premium = .04 + 1.1 × (.12 - .04) = .128 | Which stock has the highest total risk? | c. Exxon-Mobil since it has a higher volatility | | ------------------------------------------------- If a stock pays dividends at the end of each quarter, with realized returns of R1, R2, R3, and R4 each quarter, then the annual realized return is calculated as…show more content…
| a. .000024% | Stock Name | Price per Share | Shares Outstanding (Billions) | Market Capitalization (Billions) | Percent of Total | Number of Shares | Lowes | $28.80 | 1.53 | $44.06 | 10.6% | 368 | Wal-Mart | $47.90 | 4.17 | $199.74 | 48.0% | 1,002 | Intel | $19.60 | 5.77 | $113.09 | 27.2% | 1,387 | Boeing | $75.00 | 0.79 | $59.25 | 14.2% | 190 | | | Total | $416.15 | | | Number of shares = percentage shares outstanding = 190 / 790000000 = .000024% | If you are interested in creating a value-weighted portfolio of these four stocks, then the percentage amount that you would invest in Lowes is closest to: | d. 11% | Stock Name | Price per Share | Shares Outstanding (Billions) | Market Capitalization (Billions) | Percent of Total | Lowes | $28.80 | 1.53 | $44.06 | 10.6% | Wal-Mart | $47.90 | 4.17 | $199.74 | 48.0% | Intel | $19.60 | 5.77 | $113.09 | 27.2% | Boeing | $75.00 | 0.79 | $59.25 | 14.2% | | | Total | $416.15 | | | The market capitalization for Wal-Mart is closest to: Choose one answer. | a. $200 Billion | Stock Name | Price per Share | Shares Outstanding (Billions) | Market Capitalization (Billions) | Lowes | $28.80 | 1.53 | $44.06 | Wal-Mart | $47.90 | 4.17 | $199.74 | Intel | $19.60 | 5.77 | $113.09 | Boeing | $75.00 | 0.79 | $59.25 | | | Total | $416.15 | | ------------------------------------------------- Use the
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